December 30, 2011

Ford Motor
said its U.S. vehicle sales topped 2 million this year for the first time since
2007, implying a 15 percent share in the second biggest auto market in the
world. Ford's small cars sales are on pace to post an increase of more than 20
percent this year, while its utility vehicles are tracking a 30 percent gain,
the company said. With gasoline prices higher than last year, customers
continue to move toward smaller, more fuel-efficient vehicles, Ford said. The
company sold slightly more than 1.9 million cars in 2010 in the United States.*****

The National Association of Realtors (NAR) today released
benchmark revisions, which shaved more than 14% from home sales and unsold
housing inventories between 2007 and 2010 initial estimates. Apparently, the
NAR had inadvertently double-counted ...

Beyond revisions, the data showed that we are moving into a
slightly more robust recovery in home buying. Existing sales rose 4% in
November and increased at a double-digit rate from a year ago...

...Pent-up demand for housing is on the rise. Exceptionally
high cancellation rates, however, are pushing much of that demand into rental
markets instead...*****

Watch what they buy not what they say—they are all talking
their book.

Soros believes Europe is worse
off than the U.S. back in 2008 given mass uncertainty.

“It is a more dangerous
situation…to the global financial system than the collapse of Lehman Brothers…”
the 81-year old investor said. “Even if a catastrophe can be avoided, one thing
is certain: the pressure to reduce deficits will push the euro zone into
prolonged recession. This will have incalculable political consequences.”

He explained that things were
different in the U.S. during the credit crisis as the U.S. Treasury
Department’s preexisting authority and contingency plans helped to create and
implement liquidity programs in order to stabilize and recapitalize big banks;
in the process, investors gained confidence in the integrity of their deposits.

“I think that the authorities,
when push comes to shove, will do whatever it takes to hold the system
together, because the alternative is just too terrible to contemplate.”

Soros, typically regarded as a
liberal supporter, has strongly suggested the implementation of a unified
treasury for the EU to be monitored by broad European supervision.

A number of economic experts
and policymakers are growing more convinced as time goes on that Greece, which
has fallen behind on its fiscal goals even after two massive bailouts, will
have to default.

“That may not be possible to
avoid some form of reorganization…” Soros said, adding that he recommends a
partial restructuring of the nation’s debt and further proposing a European
bailout fund.

“It is very important from the
point of the view of reassuring the markets that the possibility of default is
prepared for, that in the rest of Europe arrangements are made to protect the
banking system.”

Billionaire market
speculator and philanthropist George Soros bought about $2 billion
worth of European bonds from now-bankrupt MF Global — the same debt that pushed
the firm to collapse, according to The Wall Street Journal.

When MF Global filed for
bankruptcy, the firm sold part of the bonds but still had about $4.8 billion
worth of them on its books, CNBC
reports.

They were turned over to KPMG,
MF Global’s bankruptcy administrator in London; they were then offered to big
investors by MF Global’s London clearing house, LCH Clearnet, the Journal said,
quoting a KPMG spokeswoman.

When KPMG offered the
bankrupts firm’s European debt to a variety of big investors, most of them
passed. However, they were able to find one investor willing to buy the bonds
at rock-bottom prices: George Soros.

A spokesman for Soros declined
to give details about the company’s positions.

“While our firm is always in
the market, we have a policy of not disclosing details of our positions,” the
spokesman told the Wall Street Journal.

KPMG told the Journal that the
overwhelming majority of the European sovereign debt portfolio was liquidated
by LCH before the second week in November, reports CNBC.

Does this signal that Soros is
confident that the eurozone will recover from its financial crisis?

If it does, it would seem odd,
considering that earlier
this week he said that European debt crisis is putting the
global financial system in a ”self-reinforcing process of disintegration.”

Furthermore, borrowing costs
for Italy and Spain recently hit record highs and interest rates on
10-year bonds of countries such as France and Belgium, which are considered
more financially sound, spiked last month, reports the Huffington
Post.

So what’s the angle? Why risk
$2 billion in these bonds?

Keep in mind that this is not
the first risky investment made by Soros. Recall the enormous profit he made by
gambling on Britain’s Black
Wednesday. Furthermore, Soros, who has an estimated net
worth of $14.2 billion, returned an average 30.5 percent per year on his
investments between 1969 and 2000, according to Seeking
Alpha.

Clearly, he knows what he’s
doing.

In fact, his reputation for
picking winner and losers is so great, and so many investors watch and mimic
his moves, that his investments have the power to adversely or positively
effect the markets.

“He dumped almost all of his
$800 million stake in gold in the first quarter of this year as some other
hedge funds did the same,” reports the HuffPo.
Of course, after this happened, “a commodities slump followed later in the
year, which some blamed in part on reports that Soros was liquidating his
holdings.”

Knowing that he has a tendency
to take risks, and that his gambles usually pay off, one has to ask: what’s the
angle? Does he really see a eurozone recovery?*****

This didn’t take long- except
now it will be a Shiite dictatorship:

(NYT) BAGHDAD — Prime Minister
Nuri Kamal al-Maliki of Iraq threatened on Wednesday to abandon
an American-backed power sharing government created a year ago,

In a nearly 90-minute news
conference aired on tape-delay on state television, Mr. Maliki defied his
rivals and pushed back on all fronts in Iraq’s burgeoning political crisis,
threatening to release investigatory files that he claimed show his opponents
have been involved in terrorism.

He told Kurdish leaders that
there would be “problems” if they do not turn over Vice President Tariq
al-Hashemi, who fled to the semi-autonomous Kurdish region in recent days to
escape an arrest warrant on charges he ran a death squad responsible for
assassinations and bombings*****

December 20, 2011

Today
the big boys and girls decided the glass was half full and made Turnaround
Tuesday into a barn burner to the upside. Supposedly things are better in
Europe - for today at least - and housing starts were strong as more apartments
are being built for those who can’t afford homes. We’ll take any reason for
stock to move higher.*****

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December 19, 2011

We
switched Huntington Bank to BankAmerica at $5.04 on sale and purchase.
BankAmerica is lower in price than it was in March 2009 and also lower by $2
than when Buffet made his $5 billion investment in August. Buffet’s warrants
are exercisable at $7.14.

On Thursday, Berkshire
Hathaway, run by Mr. Buffett, announced plans to invest $5 billion in Bank of
America, a vote of confidence for the beleaguered financial firm.

While investors initially
cheered the news bidding up bank stocks in trading this morning, the sector
settled down in the afternoon as the market digested the deal.

Shares of Bank of America,
which spiked more than 25 percent on Thursday, are currently at $7.55, up
roughly 8 percent. Citigroup and Morgan Stanley, both up which jumped nearly 10
percent in the morning, gave back much of their early gains, too. JPMorgan
Chase was off slightly in the afternoon.

The pullback reflects the
continued trepidation about the industry, which is clouded by economic
concerns, regulatory uncertainty, and legal liabilities.

Still, the Berkshire investment
has helped allay concerns about Bank of America. Shares of the financial firm
have been battered of late over fears the company lacks sufficient capital. The
stock has fallen by nearly 30 percent since the beginning of August.

“I remain confident that we
have the capital and liquidity we need to run our business,” Bank of America
chief executive Brian Moynihan said in a statement. “At the same time, I also
recognize that a large investment by Warren Buffett is a strong endorsement in
our vision and our strategy.”

The Berkshire investment comes
at a pivotal time for Bank of America. Its troubled mortgage division has
racked up billions of dollars in legal bills, and the financial firm faces a
nationwide investigation into its foreclosure practices. Last quarter, Bank of
America reported an $8.8 billion loss, owing in large part to a settlement with
mortgage investors.

Mr. Moynihan has taken steps
to cut costs and improve its capital cushion. He put the European credit card
operation up for sale and sold off the Canadian card division, making it clear
non-core assets would be on the block.

Last week, the bank announced
plans to cut 3,500 jobs. In a memo to employees, Mr. Moynihan said that “we owe
it to our customers and our shareholders to remain competitive, efficient and
manage our expenses carefully.”

But the embattled chief
stopped short of raising capital, reiterating that the financial firm was on
solid footing. The assertions did little to soothe investors.

Then on early Wednesday, Mr.
Buffett called Mr. Moynihan to discuss a potential deal. At first, Bank of
America’s chief was skeptical, saying the bank didn’t need a capital injection.
But Mr. Buffett emphasized it would be a long-term investment, not a short-term
fix. Over the course of the day and multiple calls, they hammered out the
investment, finalizing the details late on Wednesday.

Under the terms of the deal,
Berkshire will buy $5 billion of preferred stock that pay a 6 percent annual
dividend, and receive warrants for 700 million shares that it can exercise over
the next 10 years. Bank of America has the option to buy back the preferred
shares at any time for a 5 percent premium.

It is the sort of move
industry insiders had been expecting. In May, Morgan Stanley chief executive
James Gorman told reporters at his firm’s annual meeting that a big name
investor was bound to jump into financials, prompting the “the malaise to
lift.”

“We think this news is clearly
a positive for the entire group as Buffett’s investment injects confidence into
the system and Bank of America in particular following its consistent erosion
in recent trading,” Nomura analyst Glenn Schorr said in a research note, adding
that it should help dampen volatility in the stock.

Mr. Buffett has played the
role of savior before.

In the depths of the financial
crisis, Berkshire Hathaway gave Goldman Sachs a $5 billion lifeline, which came
with a hefty 10 percent dividend. The investment bank paid
back the money earlier this year after getting the greenlight from
regulators.

When shares of General
Electric got hit, Mr. Buffett stepped in with a $3 billion investment. The deal
also came with a 10 percent annual payout.

With Bank of America, Mr.
Buffett is once again jumping in at a point of weakness. Since the beginning of
the year, the bank’s shares have dropped to less than $7, from $15. Last year,
it was trading at more than $19.

“Bank
of America is a strong, well-led company, and I called Brian to tell him I
wanted to invest in it,” Mr. Buffett said in a statement. “I am impressed with
the profit-generating abilities of this franchise, and that they are acting
aggressively to put their challenges behind them. Bank of America is focused on
their customers and on serving them well. That’s what customers want, and
that’s the company’s strategy.”

Mr. Buffett is a fan of
financial companies that he thinks have a strong franchise and brand. He owns
Wells Fargo, gradually upping his stake over the past year. In the latest
quarter, he bought nearly 10 million shares of the lender.

He has also counted Bank of
America among his past holdings. In the midst of the subprime crisis in 2007,
Berkshire bought 8.7 million shares, quickly increasing the stake to 9.1
million shares.

But Mr. Buffett was critical
of management at the time. He told Financial Crisis Inquiry Commission that
Bank of America paid a “crazy price” to acquire Merrill Lynch in the midst of
the disaster. Mr. Buffett sold off his remaining shares in Bank of America at
the end of 2010.*****

December 16, 2011

We
switched Nokia to Ford, Research in Motion to Juniper and Ford warrants as we
gave up on the cell phone soap opera. The securities we purchased are down as
much in the last few weeks on a percentage basis and we have more confidence in
our purchases than our sales. We also eliminated St Jude and Medtronic and
moved the funds to the major bank ETF (KBE) and in some
accounts to Juniper.*****

The
Jobless claims yesterday were a positive. We continue waitinggggggggggggggg
for the markets to move higher.*****

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December 12, 2011

Intel
announced that first quarter revenues are going to be lower because of the
floods in Thailand (hard drive shortage) but that margins will be about the
same at 65%. We need to replace a Dell computer and found that Dell won’t
negotiate price as they usually do. So maybe the hard drive shortage won’t be as
dire to earnings in the short run. In the long run inventory depletion this
quarter will lead to inventory rebuild next quarter with corresponding revenue
increase for Intel. But the markets are short term focused and we have been
trading Dell for the past few years. We sold our position for a plus scratch
and we are looking to reenter Nvdia with the funds at some point. We also took
a short profit in anther anchovy- KBE- the large cap bank ETF.*****

The glass
was half empty today and markets were lower. Tomorrow is Turnaround Tuesday - we
hope.*****

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December 9, 2011

December 5, 2011

The markets were cruising
along up 1.5% at 1226 resistance when S&P announced it had placed the AAA
European countries on CreditWatch for possible downgrade. On the news stocks
pulled back. You remember S&P - they are the folks who gave all the AAA
ratings to the mortgage garbage. Why anyone listens to them after that fiasco
is beyond our comprehension but with the rally of last week the markets needed
a breather and S&P’s nonsense pronouncements are as good a reason as any
for that to occur.*****

We
added Research in Motion (BlackBerry) to some accounts in small amounts as a
yearend flip.*****

December 2, 2011

The Employment Report was OK
and stocks rallied early on only to give the gains back by the close.
Financials were strong. After the pop on Wednesday some profit taking at 1226
resistance made sense - especially ahead of the weekend. After all who knows what
the Germans will say in the next few days to make everyone feel as glum as
they.*****

We
switched U.S. Steel to Saint Jude. X rallied $5 per share in the last three
days and STJ dropped $2.80 this afternoon. We also sold lGN with a $1 profit
and invested the funds in HPQ share for share.*****

We plan on being in business for at least the next twenty years
and with this in mind we are changing the frequency and content of our internet posts. We will maintain our
concentration on market activity while we simplify our business day. We have been writing about the markets
for 27 years - on a daily basis for 12 years - and giving investment advice for 45 years. Our guess is that
while we haven’t seen and said it all we are pretty close to having exhausted any new words of wisdom
we might wish to convey. Markets don’t repeat but they do rhyme. By not posting dally we will be
freed up to do some summer/winter activities such as gardening/snowshoeing, riding our horses,
walking the dogs and spending a bit more time with the prince and princess when they visit. And
so we are going to end our lengthy daily comments but we will continue to post periodically when
market events warrant and/or when there is activity in the Model Portfolio.
*****

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